Saw an Attorney today and confused==>Plz help

[halelani]

I went to see an attorney today regarding a BK13. I'm confused. He will charge me 775 upfront and the rest of his $3225 will go into the BK13. He said I would pay $400 a month for 4 years at which point I would then have to address the balances of the unsecured debt. He said the trustee would be willing to go that way. He said I had to much equity in my home. This would give me time to sell my home or refinance to pay the unsecured debt. Has anyone heard of this before?? Where does the $400 a month for 4 years go and why do I still have unsecured amounts due after 4 yrs?

[liz417]

I would consult with at least 3-4 other attorneys first. At the end of your ch 13, you are DONE and all (unsecured) debts are discharged.

Find another attorney that is more familiar with BK law.

Good Luck!

[BigJohn]

The first lawyer I saw almost scared my pants off. Try another lawyer.

[Flamingo]

What this attorney is doing is keeping your payment low and having you refinance toward the end of your Plan since you would have a lot of equity at that time (start the process say like month 55 of a 60 month plan) and pay off the remaining balance in full at that time. It was a common practice under the Old Law (prior to 10/05). You will pay off the attorney and the secured/priority creditors first (part of the attorney's fees in the plan). Apparently he does this a lot under the right circumstances (large equity in house) and if the trustee is in agreement it works; the problem is getting the refinancing toward the end of your plan but it can be done.

[StartingOver08]

I agree with the others - see another attorney.

What worked a few years ago (refinancing your property to end the plan early) does not sound like a viable plan today. Why would you enter a Ch 13 to fund a payment plan and then add the balance of your debt to the house? It makes no sense to me in today's market.

Find a good Ch 13 attorney - it may involve quite a few interviews. Make sure the information you are providing regarding your asset valuation is correct. This is an error many people make - they use older/higher values for their assets and provide that info to the attorney. Then the attorney has the wrong information and can not evaluate the case correctly. Don't overprice your stuff.

[krielly]

I agree. Re-financing to end your plan early may be a thing of the past. I filed old law, and was thinking about re-financing my house to get a good rate, and pay off the remaining 8K under my plan (we have more than enough equity).

I've done a bit of fishing on the matter by sending emails to some banks. No go. They want to wait 2 years after discharge. You know, it really irks me, cause if we filed Chap 7, back then, we'd be eligible now to refi. Because we are paying back 28% of our debt, and filed 13, under the new guidelines most banks have now, we can't do it till 2 years after discharge. So much for trying to do the right thing My only option is to do an FHA refi, but they want to go 30 years. No thanks. Been in our home 7 years, and I'm not starting that 30 year clock over again. Nope!

So...........I'll just pay that 8K off over the next 14 mos or so.....at least its interest free money!!!!!

Anyhow...... I digress. I agree. See at least a couple more attorneys for a different perspective. If your first lawyer left you this confused.....you really dont' want to be having to deal with him for the next 4-5 years

Good Luck!

[woeisme]

If you have a lot of equity in the house that isn't protected by your homestead or wildcard exemptions, you have to pay that money to the creditors, either through a CH 7 liquidation or over the course of 60 months in a CH 13. Sounds like your lawyer is trying to put off paying the piper til the end of your BK, but the thing is, it must be paid. Sounds like to me that the $400/month/4years isn't enough to cover your equity, which is why you need to pay more at the end. But the rule is that the creditors must get at least as much in a CH 13 as they would if they forced you into a CH 7 liquidation, there's no getting around that, sorry.

[StartingOver08]

Woeisme is correct about the process - but the question becomes how much would your creditors receive in a Ch 7 liquidation.

That goes back to what I mentioned before - check your actual property value. Don't use the property tax 'market valuation' or zillow or any other automated valuation system. Get a professional appraiser out to give you today's market value - that will answer your question. If you don't yet have the funds for an appraiser - get an experienced Realtor to give you 3 comp sales in the neighborhood that have SOLD and CLOSED within the last 90 days. This is called a CMA and is free.

[halelani]

Thank you Woeisme and StartingOver08, Kreilly. I now understand why. I have a lot of equity in my home and yes a Chapter 7 would have satisfied the unsecured debt. My concern, as mentioned, is being able to refi to satisfy the debt. I will try to sell the house before the four years is up, otherwise I'm dead in the water....

[HHM]

There was actually a recent case about balloon payments in chapter 13, I can't find the site, but the case held that balloon payments dependent on home refinancing were nixed.

[halelani]

I see as I found the Circuit Court Case, thank you. I think this attorney is saying to me the trustee will accept $400 a month for 4 years. It is up to me to figure out a way to sell or refinance my home. Just trying to buy me time and hope the economy turns around so I can do something? I'm SOL if I can't get the funds an incredibly difficult position as I know it will be nearly impossible for me to refinance, and I'll be lucky to sell it. My hand will be forced to roll into a Chapter 7. All this information helps, as it really helps for me to see a little more clearly the rules.

[Flamingo]

I see as I found the Circuit Court Case, thank you. I think this attorney is saying to me the trustee will accept $400 a month for 4 years. It is up to me to figure out a way to sell or refinance my home. Just trying to buy me time and hope the economy turns around so I can do something? I'm SOL if I can't get the funds an incredibly difficult position as I know it will be nearly impossible for me to refinance, and I'll be lucky to sell it. My hand will be forced to roll into a Chapter 7. All this information helps, as it really helps for me to see a little more clearly the rules.

Halelani - read my posting above. Your attorney is giving you the option of having a lower payment through your bankruptcy due to the fact that you have a lot of equity now and at the end of your plan will have more. What he is proposing does not pay off your Plan early - you go to the end. We had the same deal. Our original plan payment was $1700 per month. Shortly after we filed, the company I was working for at that time went bankrupt and prior to our 341, I was out of a job but was able to get another quickly (at our attorney's instruction) but paying $6,000 per year less. Our Plan was modified and since we could not afford the original payment, our attorney gave us the option you have received since we had a large amount of equity (we wanted to keep our house). Our Plan payment became $500 per month with refinancing at month 55 of our 60 month plan. Due to needing major house repairs and a new roof, we bought out early at the 4 year mark. We only refinanced for what we needed to pay off the plan and for the house repairs. That still left us a lot of equity which we did not touch. We are sitting well right now due to that as our house has not declined in value that much due to our location and the land we have We had no trouble obtaining financing at 6.5% in 4/06 on a 30 year FHA loan and our scores were in the 670 range at that time according to the mortgagor. Our broker steered us away from any ARMS as all sorts of predatory options were available and they jumped on us like flies. If you go through with this option, get a good broker when you start to refinance - your attorney is a great source for that information.

Best of luck to you.

[StartingOver08]

Flamingo, we were in an entirely different housing market and credit market in 2006 when you refinanced.

We have no idea what the housing or credit market will be like four years from now in 2013. I think it is not very prudent to rely on the market rebounding in that time period to finish the plan. Obviously the OP has to make some sort of decision, but to plan to refinance in order to complete the Ch 13 is taking a high degree of risk at this point. I don't think you can compare 2006 to now or to 2013.

[krielly]

I agree. See my post earlier in this thread about my inquiries as to refinancing during a 13. They want 2 years PAST discharge.

It is without question, an entirely different market right now.

K

[halelani]

Yes I agree with all of you. In this housing market the rules have changed from times past. I'm concerned for as I near the end, I will not have what it takes to buy out the plan...but you never now. And who knows, maybe those loan mods that Obama put in place might get used (LOL). Now pushing me out 4 yrs doesn't mean I have to pay off my mortgage too does it? Just the balance of the unsecured portion of the plan right?